Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary
B. B; no output
C. B; expansionary
D. A; a recessionary
Answer: A
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Efficient production can be carried out anywhere on or beyond the production possibilities frontier.
Answer the following statement true (T) or false (F)
Domestic firms operating abroad may find it economically beneficial to adopt environment-friendly standards because
A) foreign nations may be upset if firms do not use the environment-friendly technology. B) the least-cost strategy usually involves the adoption of one set of environment-friendly technology rather than multiple standards. C) they may be forced to replace the old technology whenever the foreign country experiences positive economic development. D) their environment-unfriendly technology may be replaced by foreign-based technology. E) Only C and D are correct.
Which of the following governmental expenditures are not included in gross domestic product?
a. The construction of federal buildings b. Social Security payments c. Salaries for senators d. Purchases of new defense weapons
If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include:
a. the entry of new firms. b. temporarily higher profits. c. both a and b. d. neither a nor b.